April 25, 2014

“Made in the USA”

A friend has just sent me a You-tube arguing that Americans should stop buying imported goods and instead “Buy American.” It presents what initially might sound like a rather convincing argument: if we stopped paying foreigners for making things for us, and instead put our workers back into our own factories, America would completely eliminate unemployment.

It sounds well-informed with all sorts of statistics to back up its argument. But I think it is economically and perhaps even morally quite naive. Inward investment – ie: investments from companies setting up businesses in poorer countries – has been the single most effective means of reducing poverty in the emerging economies in the last 20 years. So now America brings all those jobs back “home”? What happens to the families of those workers who have been working to support their own families in other countries? young women who are supporting their families are driven back onto the streets, children no longer have any chance of an education, medical help is harder to get, starvation increases.

And trade is reduced not only for the emerging economies but for America. America sells our cars, our computers, our food, etc. to the people in other countries who can now afford them. That’s why free trade, when it is done well, is a win-win situation. Each country sells to the other what they can best produce or grow, and buys from the other those things that are better done in that country.

Under the influence of Gandhi, India tried the Totally Self-Sufficient policy — we will make our own clothes, grow our own food, build our own trains & cars, etc. It was in response to a one-sided trade arrangement that Britain had set up which had been great for the British — they imported Indian cotton, brought it back to the UK, turned it into cloth and clothes and sold it back to the Indians. So it was understandable that India thought they could do it for themselves. But it is only in recent decades when they opened the country up to international trade that they seriously began to reduce grinding poverty in the country. China tried it too, closing its doors to foreigners, and as a result, the West went galloping ahead.

No, Buy American is, in my opinion, an ignorant and destructive economic policy.

Yes, what we call “free trade” can be lopsided and destructive, and in some cases needs serious rebalancing. But my own concern is not fundamentally with free trade. Actually, many jobs are now coming back to the U.S., as transportation is getting cheaper, and workers in developing countries are demanding better pay. So the issue is not essentially that foreigners are taking all our jobs, but rather that so few at the top of American society are taking such a great proportion of the profit. For at least 30 years, the middle classes in the U.S. have been getting less and less of the profits while the CEO’s and those in the top 5% are making mind-boggling profits which are not filtering down to the workers. And if you want to add another problem, it is technology. A lot of jobs are simply disappearing, and being replaced by automation and robots.

So we might very well find ourselves back to the question Henry Ford asked a century ago about his cars: how can I make them affordable enough for people to buy them? The whole entire global economic system is changing, and solutions like “buy American” aren’t going to work. I think ultimately it could make things worse.

Because we are all in this together It’s a global society now, and we can’t solve our own problems without worrying about everybody else. This isn’t Christian charity. It’s hard economic fact. The bottom line is that I have to worry about you for my own self-interest.

This blog is to help me remember that there is inevitably another way of looking at things besides the one that seems obvious to me. I find that if I can't see another possibility myself, other people are usually able to help with amazingly little effort.

Your comments to disrupt my point of view are welcome.

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